Trends in Retirement and Retirement Income Choices by Tiaa Participants: 2000–2018

Abstract

This paper documents trends over the last two decades in retirement and retirement income choices by TIAA participants. From 2000-2018, the distribution of retirement ages shifted to older ages. The average retirement age rose by approximately 1.3 years for women and 2 years for men. There is considerable variation in the elapsed time between retirement and the start of income draws from a participant’s retirement plan account, with only 40% of participants taking an initial income payment within 48 months of retirement. The combination of later working lives and delayed first retirement income led to a growing fraction of TIAA participants reaching the Required Minimum Distribution (RMD) age before taking any initial income draws. From 2000 to 2018, the fraction of retirees taking no income until their RMD rose from 10% to 52%. Concurrently, the fraction of first-time retirement income claimants who selected a life-contingent annuitized payout stream declined from 61% to 18%. Among those who made an initial income selection before age 70, annuitization rates were significantly higher than among those who began income draws at an older age. About one-fifth of retirees received more than one type of income; the most common pairing was an RMD and a life annuity. Among all participants receiving retirement distributions, the proportion who had a life annuity as part of their payout strategy fell from 52% to 31% between 2008 and 2018, although a life annuity remained the most common form of retirement income distribution. By comparison, the proportion taking an RMD payment roughly doubled, from 16% to 29%. We find evidence that an RMD is becoming the de facto default distribution option for newly retired TIAA participants.

Keywords: TIAA, RMD, required, minimum, distribution, retirement, income, life annuity, payout, strategy, de facto, default, participants

JEL Classification: G51, J32, G11